So far in 2015, extreme weather ranging from a multi-year drought in California to the current storms rolling across the Midwest have impacted the underlying price of key agriculture commodities. Taking a look at the chart of the PowerShares DB Agriculture Fund (DBA), an ETF used to track changes of the DBIQ Diversified Agriculture Index Excess Return plus interest income from the Fund’s holdings in US treasury bonds, you’ll see that it has recently broken above a key level of resistance. This fund is a convenient product for retail investors looking to gain exposure to key agriculture commodities such as cattle, cocoa, coffee, corn, lean hogs and soybeans and based on the price action it appears that the fund could be headed higher. (For more, see: Commodity Traders Are Watching These 3 Charts)

From an active trader’s perspective, the recent move above the 100-day moving average (red line), which has prevented the price from heading higher in the past, is a sign that the trend is turning in favor of the bulls. Also, the 50-day moving average, which is about to cross above the 100-day moving average, will be used as a buy signal and will be the confirmation that many need before they enter a position. From a risk management standpoint, we’d expect bullish traders to protect their long positions by placing stop-loss orders below the combined support of the 50-day and 200-day moving average, which are trading at $22.40 and $22.44 respectively. (For more, see: Moving Average Strategies)

Technical chart showing a reversal in agriculture commodities.

Rising Meat Prices

Rising costs of cattle, poultry and lean hogs have many investors interested in adding exposure to this segment in their portfolios. One of the largest players in this sector is Tyson Foods Inc (TSN), which took in more than $37 billion in sales in 2014. Astonishingly, the company produced one in every five pounds of chicken, beef and pork in the U.S, gives it a scale that makes it extremely difficult to compete against. Taking a look at the chart, you can see that this has been the case and that two recent bounces off of the 50-day moving average suggests that the momentum is undoubtedly in the favor of the bulls. Traders will likely hold a bullish outlook on this stock until it closes below the support of its 50-day moving average ($42.22) or the 200-day moving average ($40.45) depending on risk tolerance. (For related reading, see: How To Trading Rising Livestock Prices)

Given the rise in meat prices, traders are watching companies such as TSN.


Taking a look at the price of corn, which is commonly measured by the Teucrium Commodity Trust Corn Fund (CORN), you can see that the break above the descending trendline in late June (blue circle), triggered a reversal in the downtrend and the momentum has been strongly in favor of the bulls ever since. The strong move above the 200-day moving average and the break above the horizontal trendline, outlines key areas that will likely be used by the bulls for determining the placement of their stop-loss orders. At the very least, most traders will likely keep a bullish outlook on the price of corn until the price closes below $25.08. (For more, see: Investing Seasonally In The Corn Market)

Technical chart of the CORN fund rising above key resistance levels.

The Bottom Line

So far this summer, it appears that extreme weather is driving the price of many agriculture commodities higher. Specifically, commodity traders are keeping a close eye on meat prices and companies such as Tyson foods, which have strong exposure to this segment. Corn is another area of the market that has garnered a lot of attention and many are wondering whether the fresh two-month high is a sign of higher prices to come. (For more, see: Strategic Traders Are Turning To Agriculture)



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